Star Ford

Essays on lots of things since 1989.

Village Economics: A theory of economics for a high quality of life in a village

on 1998 June 14

The discipline of economics seems to muddle everything. Specifically, measurements and indicators are seen as ultimate goals. Money, the principal economic tool, takes on independent value within the discipline and therefore in policy. Money-focused policymakers then neglect the quality of life, which is the whole point of economics in my view. Since policies target the indicators of quality of life directly, such as interest rates or GNP1 (rather than targeting the quality of life, which indirectly results in an affect on the monetary indicators), they reduce the accuracy of the indicators and therefore reduce the overall ability to manage the economy.

The situation is analogous to focusing on the tools of publishing (media) to the total neglect of what the tools are in service of: literature. While the study of media is interesting and important, it is ultimately only a container for literature (in the general sense). If, for example, the sales of a book are an indicator of the quality of the literature in the book, and the cost of book production drops, and consequently the sales increase, the quality of the literature cannot be presumed to have increased. Similarly, money itself may be fascinating, but it is only a tool to facilitate labor exchange. And labor is the primary variable in the quality of life.

In this article I am discussing village economics. I am using the word “village” for any manageable population. It is very important for me to think of economics in terms of a village, because I can visualize the quality of life in a village. My mind can encompass the entire economic activity of a village, but I can’t grasp at once the whole economy of an industrial country.

The first in a series of points that make up my theory of economics is that production ultimately matters, not service. We in USA say we have a “service economy,” and think we are advanced because of it. But imagine a village full of people doing services for each other and no one producing anything. Naturally, the village will quickly fall into poverty. This is what’s happening to the country, too. The service-heavy economy is unsustainable on any scale.

Second, the total of all productive labor is the basis of the quality of life, not the amount of money that exists in a village, or the investment rate, or anything else. Money factors are indicators of labor, but policies should attempt to influence the labor basis, not the indicators. Productive labor is either direct (eg. someone builds her own house), bought internally (eg. someone pays a village carpenter to build her house), or bought externally (eg. someone pays a foreign carpenter to build her house). In the last case the labor is imported. The important thing is the house, which owes its existence entirely to labor, regardless of the flow of money.

Third, money that circulates in the village is worth the cumulative effect of the productive labor it stimulates each time it changes hands. Money that is exported can only import labor once, while money that changes hands within the village can stimulate labor many times. If productive labor is what you want, then try to keep currency local for as long as possible.

Fourth, the best place to get money is where most of it is, obviously. For example, any activity done on Wall Street, Manhattan is more lucrative than that same activity done in Nowhere, Iowa, whether that activity is stock exchange or fruit retail. The corollary of this point is that the worst place to spend money is where most of it is. Therefore, a village should try to import currency from where it gravitates and export it to where it is scarce. This policy of counterflow not only is in the village’s favor, but it is also in the interest of equalizing the money distribution in the larger environment.

Fifth, the total amount of products the village imports should not exceed the total amount of labor the village is willing to export. Otherwise they run out of money. So, a village should export the available labor that has high export value and use internally the available labor that has high direct value. If an assembled rural village of 30 people has expertise valued at 5 FTEs2 of computer programming and 5 FTEs of farming, it should export the programming labor and use the farming labor internally, because the programming labor has higher export value. The opposite of this (a bad idea) is to do export work that has low export value (such as farming) to get currency in order to buy products from outside the village, where the products are intended to increase the quality of life. Usually (for example in the third world and rural America) the export value of labor can never equal the import value of products. Even if the price of the export and import is the same and the village does not go into debt, the value of the resulting product (direct plus imported labor) under this system as measured in terms of the quality of life will forever decline. (Just another way of saying that the quality of life is not the same as the debt or surplus of money.)

Here is my conclusion: every village needs a policy to balance the value of exported labor and imported products, no matter whether it uses a communist labor policy or not and no matter what system of currency or credits it uses. A high quality of life relies on labor and currency staying within the village.

efficiency: the economic duh-factor

Many people see the economy as a huge complex machine that requires experts to constantly monitor and tune it. However, anyone can understand the economy as as a simple matter: the work we put in and the quality of life we build for ourselves through that work. The health of the economy is measured by how equitable, stable, and extensive are the systems through which we meet our basic needs. The basic economic indicator is “quality per hour” – the quality of life we get for the hours we put in.

We should not worry about competing with other countries; If there is a problem with the trade balance, we should import less and make more stuff locally.

Efficiency: If we are working harder than ever, and more people than ever in the US are in poverty, then we are working super-inefficiently. This is the duh factor, and the obvious solution is to work directly to meet our local basic needs in a durable way without superfluous “work” like marketing and litigation, and without undoing previous work.

1Gross National Product: a measure of the total national annual spending by all sectors

2Full Time Equivalent: amount of labor equivalent to the labor of one full-time worker, whether it is done by one worker or several part time workers.

Advertisements

2 responses to “Village Economics: A theory of economics for a high quality of life in a village

  1. Anonymous says:

    village economics should be sustainable economic

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: